Interview: Lifting the lid on how outsourcing giants offer government a ‘diseconomy of scale’

Written by Sam Trendall on 9 August 2017 in Features

Features

Littlefish boss Steve Robinson has worked in Whitehall as part of both an SME and a multinational. Here, he shares his insights from both sides of the fence

With each department within a large company adding their own costs to every deal, the final price is typically much more than smaller firm, Steve Robinson claims

Contrary to popular belief, the bulk and breadth of big outsourcers and systems integrators is typically what makes them more expensive than SMEs, a central government IT supplier has claimed.

Nottingham-based IT managed services provider Littlefish works with central government bodies including the Food Standards Agency, UK Export Finance, and the National Audit Office, the company’s managing director Steve Robinson tells PublicTechnology.

Earlier in his career Robinson worked at Capita, a company he joined via its 2008 acquisition of IT reseller Computerland. He spent two years with the business process outsourcing (BPO) giant before joining Littlefish as part of a team that led a buyout of the firm.

Robinson says that his time at Capita “gave me a much greater exposure to enterprise BPO”. But it also, he adds, offered an insight into how the outsourcer and its rivals often paid less attention to the IT elements of their big, overarching contracts with government bodies.

“They feel like they need to do these lower-grade activities [such as IT services] to get their foot in the door, but they do not really invest in them,” says Robinson. “We thought [Littlefish] could really home in on being the best in delivering those IT outsourcing skills.”

He adds: “We knew we would have to build our credentials. [Since 2010], we have grown from half a million to £10m annual turnover. And, in the last couple of years, we have really made good in competing against the likes of Atos, Fujitsu, and Capita.”

Seven years ago the formation of a new government – and the concurrent change of personnel in Whitehall – came at an ideal time for Robinson and the rest of the team behind Littlefish’s reinvention, the MD believes.

“The Cabinet Office were pushing the SME agenda and GDS were pushing the disaggregation agenda, and both of those worked to our advantage,” Robinson says. “All of [our central government contracts] have been won against an incumbent that was [a BPO provider] in a single-supplier environment. And we are working at a much lower price point than any of them.”

Robinson claims that his experience of working for a BPO provider taught him that, in contradiction of received wisdom, working with an outsourcing monolith typically offers public sector entities a “diseconomy of scale”.

He explains: “If I think about how a deal might be constructed, someone would construct the bid at a meta level, then someone [in a certain department or function] would add their margin on, then someone else would do the same, then someone would [redefine it as] a local government contract – so that team would add their margin on.

“These are large companies, and everyone [in each department] is running their own ship.”

An example of a smaller firm’s ability to strip out cost – and, Robinson claims, deliver a better service – is that Littlefish has effectively done away with the first-line desktop support element of its service desk. This means all desktop support queries are immediately handled by staff able to offer a second line-level service, the MD says.

Playing the mediator
The last seven years have brought a great deal of change in central government’s IT strategy – not to mention the people employed to define and realise it. Perhaps the biggest development during that time was the founding of the Government Digital Service in late 2011.

This time period was a challenging one for government IT suppliers, who found themselves acting as a “mediator” between different Whitehall players, Robinson says.

“Five years ago, when GDS first started, any spending over £100,000 practically had to be personally signed off by [then chief technology officer] Liam Maxwell. I know there was a lot of pushback [against that] within the departments,” he adds.

“For us, it was quite hard to sit between the two – we do not want to align with GDS if it might stop the departments working with us. But we do not want to align with the departments if it stops GDS advocating for us.”

When GDS first started, and any spending over £100,000 had to be personally signed off by Liam Maxwell, I know there was a lot of pushback within the departments

The leadership of Francis Maude in the Cabinet Office and Mike Bracken in GDS brought with it a sharp focus on driving hefty cost savings and breaking up large, overarching contracts with big suppliers. Both the Cabinet Office and GDS have seen a number of changes in senior management in recent years.

But Robinson claims that, whatever strategy the current leaders pursue in the future, the last few years have had a lasting impact on the supplier landscape. The big BPO providers may have learned some valuable lessons, he says.

“The important thing is that there has been a shift. The likes of Fujitsu, Atos, and Capita have been through a period of watching contracts they would have normally won go to other people,” Robinson adds.